SECURITIES
AND EXCHANGE COMMISSION
|
|
(Mark One) |
| ý |
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended December 31, 2001 |
| OR |
| o |
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from | to |
|
Commission file number 1-14157 |
| A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
|
Telephone and Data Systems, Inc. |
| B. | Name of issuers of the securities held pursuant to the plan and the addresses of the principal executive office: |
Telephone and Data Systems, Inc.
|
Required Information |
| (a) | Financial Statements |
| 1. | Independent Auditors Reports. |
| 2. | Audited Statements of Net Assets Available for Benefits as of December 31, 2001 and December 31, 2000. |
| 3. | Audited Statement of Changes in Net Assets Available for Benefits for the year ended December 31, 2001. |
| 4. | Notes to Financial Statements. |
| 5. | Schedule of Assets (Held at End of Year). |
| 6. | Schedule of Reportable Transactions. |
| (b) | Exhibits |
| No. | Description |
| 23.1 | Consent of Independent Public Accountants |
| 23.2 | Consent of Independent Public Accountants |
|
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INDEPENDENT AUDITORS’ REPORTTo the Investment Management Committee We have audited the accompanying statement of net assets available for benefits of Telephone and Data Systems, Inc. Tax-Deferred Savings Plan as of December 31, 2001 and the related statement of changes in net assets available for benefits for the year then ended. These financial statements are the responsibility of the plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the plan as of December 31, 2001 and the changes in net assets available for benefits for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information of Telephone and Data Systems, Inc. Tax-Deferred Savings Plan, as listed in the table of contents, is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental information is the responsibility of the plan’s management. The supplemental information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Virchow, Krause & Company, LLP Madison, Wisconsin |
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Page 1
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INDEPENDENT AUDITOR’S REPORTTo the Investment Management Committee We have audited the accompanying statement of net assets available for benefits of Telephone and Data Systems, Inc. Tax-Deferred Savings Plan as of December 31, 2000. This financial statement is the responsibility of the Plan’s management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statement referred to above presents fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. McGLADREY & PULLEN, LLP Madison, Wisconsin |
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TELEPHONE AND DATA SYSTEMS, INC.
TAX DEFERRED SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2001 and 2000
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ASSETS
2001 2000
-------------- --------------
Investments, at fair value $ 120,001,618 $ 110,357,893
-------------- --------------
Receivables
Company contribution -- 4,152,574
Accrued income 3,715 7,551
Due from broker for securities sold 11,390,026 18,072
-------------- --------------
Total Receivables 11,393,741 4,178,197
-------------- --------------
TOTAL ASSETS 131,395,359 114,536,090
-------------- --------------
LIABILITIES
Due to broker for securities purchased 11,770,407 434,914
-------------- --------------
TOTAL LIABILITIES 11,770,407 434,914
-------------- --------------
NET ASSETS AVAILABLE FOR BENEFITS $ 119,624,952 $ 114,101,176
============== ==============
See accompanying notes to financial statements.
Page 3
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TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended December 31, 2001
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ADDITIONS
Additions to net assets attributed to
Investment income
Net depreciation in fair value of investments $ (14,177,770)
Interest and dividends 2,142,312
Contributions
Participants' 17,284,352
Company 7,664,894
Participant rollovers 1,002,662
-------------
Total Additions 13,916,450
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DEDUCTIONS
Deductions from net assets attributed to
Benefits paid to participants 8,393,371
Investment expenses 30,435
-------------
Total Deductions 8,423,806
-------------
TRANSFER OF ASSETS FROM OTHER PLANS 31,132
-------------
Net Increase 5,523,776
NET ASSETS AVAILABLE FOR BENEFITS -
Beginning of Year 114,101,176
-------------
NET ASSETS AVAILABLE FOR BENEFITS -
End of year $ 119,624,952
=============
See accompanying notes to financial statements.
Page 4
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TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
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NOTE 1 - Description of the Plan
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The following description of the Telephone and Data Systems, Inc. Tax-Deferred
Savings Plan (the "plan") provides only general information. Participants should
refer to the Telephone and Data Systems, Inc. Tax-Deferred Savings Plan summary
plan description for a more complete description of the plan's provisions.
General
The plan is a contributory tax-exempt profit-sharing plan established by
Telephone and Data Systems, Inc. (TDS, the "company") and is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The
company is the administrator and sponsor of the plan and has approved Bank of
New York Midwest Trust Company as trustee of the plan. The Bank of New York is
the asset custodian of the plan, and they provide record keeping and reporting
services to the plan in conjunction with Hewitt Associates, the plan's
third-party administrator. The plan qualifies under Section 401 and 501 of the
Internal Revenue Code. All employees of Telephone and Data Systems, Inc. and its
subsidiaries that are age 21 or older are eligible to participate. Prior to
January 1, 2001, employees needed to complete three months of service to
participate in the plan. The plan was amended to remove the three months of
service requirement for 2001, and now allows participants to enter the plan upon
the latter of their first day of employment or twenty-first birthday .
Participation is completely voluntary.
The plan's assets are administered by an investment management committee
appointed by TDS. The investment management committee is authorized to invest
plan assets as directed by the participants, except in the case of the employer
match which is invested in the common stock of TDS or the common stock of its
subsidiary, United States Cellular Corporation (USCC). All administrative,
recordkeeping and auditing fees are borne by TDS.
Contributions
For the year ending after December 31, 2001, participants may contribute up to
25% of pretax annual compensation (salary reduction contributions), as defined
in the plan. In previous years, participants' contributions were limited to 15%
of pretax annual compensation. Participants may also contribute amounts
representing distributions from other qualified plans (rollover contributions).
As of January 1, 2001 the company's matching contribution is 100% of the first
2% of a participant's salary reduction contributions and 40% of the next 4% of
salary reduction contributions. In previous years, the company matching
contribution for employees of USCC, Aerial Communications, Inc. and Suttle Press
was 100% of the first 2% of a participants reduction contributions and 25% of
the next 4% of salary reduction contributions. All other participants received
30% of the first 6% of their salary reduction contributions.
Company contributions of USCC and Aerial Communications, Inc. are made in USCC
and Aerial common stock, respectively. All other company contributions are made
in TDS common stock. See notes 7 and 10.
Contributions are subject to certain limitations.
Page 5
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TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
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NOTE 1 - Description of the Plan (cont.)
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Participants' Accounts and Investment Options
Each participant's account is credited with the participant's salary reduction
contributions and allocations of the company's contributions and plan earnings.
Allocations are based on participant earnings or account balances, as defined in
the plan. The benefit to which a participant is entitled is the benefit that can
be provided from the participant's vested account.
Participants may invest their personal contributions and any rollover account
balances into a variety of investment options as more fully described in the
plan's literature. Participants may change their investment options via
telephone at any time. During the year ended December 31, 2001, the plan
replaced the Loomis Salyes Bond Fund and Credit Suisse Institutional Fund
International Equity investment options with the Pimco Total Return Fund and
Putnam International Growth Fund, respectively.
Vesting
Participants are immediately vested in their salary reduction and rollover
contributions plus actual earnings thereon. Vesting in company matching
contributions plus actual earnings thereon is based on years of continuous
service and is subject to a three-year graded vesting schedule as follows:
Vesting Years of Service Percentage Vested
1 33%
2 67%
3 100%
A participant also becomes 100% vested in company matching contributions plus
actual earnings thereon upon retirement, death or disability.
Forfeited Accounts
During the year ended December 31, 2001, forfeited nonvested accounts were used
to reduce employer contributions by $118,853.
Payment of Benefits
Benefits may be paid to the participant or beneficiary upon death, disability,
retirement or termination of employment, as defined in the plan agreement. The
plan provides for normal retirement at age 65 and early retirement on or after
attaining age 55. The total vested portion of a participant's account balance is
distributed in the form of a lump-sum payment, installments, or an annuity.
Participants experiencing financial hardship may withdraw a portion of this
account balance as defined in the plan.
Termination of Plan
Although it has not expressed any intent to do so, the company has the right
under the plan to terminate the plan at any time subject to the provisions of
ERISA. In the event of plan termination, participants become 100% vested in
their accounts.
Page 6
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TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
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NOTE 1 - Description of the Plan (cont.)
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Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50% of their account balance
(excluding employer matching contributions). These loans are secured by the
balance in the participant's account. The loans bear interest at the prime rate
plus 1 % as published in the Wall Street Journal on the first business day of
the quarter in which the loan is approved. Principal and interest is paid
ratably through monthly payroll deductions. The repayment period on the loan can
range from one to five years. Loans will be considered in default if no loan
payment is received during any 45-day period.
Administrative Expenses
The company pays a majority of the plan's administrative expenses.
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NOTE 2 - Summary of Significant Accounting Policies
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Basis of Accounting and Use of Estimates
The accompanying financial statements have been prepared on the accrual basis of
accounting. The preparation of the financial statements in conformity with
generally accepted accounting principals requires the plan's management to use
estimates and assumptions that affect the accompanying financial statements and
disclosures. Actual results could differ from these estimates.
Investment Valuation and Income Recognition
The plan's investments are valued at fair value. Shares of registered investment
companies, TDS Common Stock, VoiceStream Wireless Corporation Common Stock and
USCC Common Stock are valued at quoted market price. Shares held in bank common
trust funds and money market funds are reported at fair value based on the unit
prices quoted by the fund, representing the fair value of the underlying
investments. Participant loans are valued at cost, which approximates fair
value.
Net depreciation in fair value of investments included in the accompanying
statement of changes in net assets available for benefits includes realized
gains or losses from the sale of investments and unrealized appreciation or
depreciation in fair value of investments. Net unrealized appreciation or
depreciation in the fair value of investments represents the net change in the
fair value of the investments held during the period. The net realized gains or
losses on the sale of investments represents the difference between the sale
proceeds and the fair value of the investment as of the beginning of the period
or the cost of the investment if purchased during the year.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis and dividends are recorded on the
ex-dividend date.
Payment of Benefits
Benefits are recorded when paid.
Page 7
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TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
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NOTE 3 - Investments
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The following presents investments as of December 31, 2001 and 2000 and
investment income for the year ended December 31, 2001.
2001 2000
-------------- --------------
Investments
Bank common trust funds
LaSalle National Pooled Income $ 17,412,241* $ 10,631,707*
Bank of New York 2,176,968 1,695,580
Common stock
Telephone and Data Systems, Inc. 28,773,671* 23,634,540*
United States Cellular Corporation 17,226,358* 17,191,374*
VoiceStream Wireless Corporation -- 5,855,570*
Mutual funds
Vanguard Institutional Index Fund 27,675,531* 29,410,632*
Pimco Total Return Fund 5,543,449 --
Loomis Salyes Bond Fund -- 4,483,742
Putnam International Growth Fund 4,922,648 --
Credit Suisse Institutional
Fund International Equity -- 5,666,193
Selected American Shares 4,759,611 2,607,181
Mercury Select Growth Fund 2,031,172 970,487
Turner Midcap Growth Fund 6,584,348* 5,611,563
Participant loans 2,895,621 2,599,324
-------------- --------------
Total Investments $ 120,001,618 $ 110,357,893
============== ==============
Investments that represent 5% or more of the plan's net assets are separately
identified with an "*".
During the year ended December 31, 2001, the plan's investments (including gains
and losses on investments bought, sold, and held during the year) depreciated in
value as follows:
Bank Common Trust Funds $ --
Common stock (6,230,818)
Mutual funds (7,946,952)
-------------------
Net Change in Fair Value $ (14,177,770)
===================
The information presented above includes non-participant directed funds as
discussed in Note 4.
Page 8
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TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
--------------------------------------------------------------------------------
NOTE 4 - Nonparticipant-Directed Investments
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Information about the net assets and the significant components of the changes
in net assets relating to the nonparticipant-directed investments is as follows:
2001 2000
-------------- --------------
Investments
Common stock
Telephone and Data Systems, Inc. $ 12,651,276 $ 8,160,074
United States Cellular Corporation 9,234,884 6,732,654
VoiceStream Wireless Corporation -- 52,100
Bank common trust funds
Bank of New York 859,040 566,548
-------------- --------------
Total Investments 22,745,200 15,511,376
Receivables
Company contribution -- 4,152,574
Other 48,622 2,435
-------------- --------------
Total Assets 22,793,822 19,666,385
Liabilities 237,479 123,539
-------------- --------------
Total Nonparticipant-Directed Net Assets $ 22,556,343 $ 19,542,846
============== ==============
During the year ended December 31, 2001, the nonparticipant directed investments
changed in value as follows:
Net depreciation in fair value of investments $ (3,201,655)
Interest and dividends 70,947
Contributions 7,662,950
Benefits paid to participants (1,518,745)
--------------
Net Increase $ 3,013,497
==============
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NOTE 5 - Amount Owed to Participants Withdrawing From the Plan
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Amounts owed to participants who have withdrawn from the plan total $368,489 as
of December 31, 2001, and are included in net assets available for benefits.
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NOTE 6 - Parties In Interest
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Certain plan investments are shares of a common trust fund sponsored by the Bank
of New York. Bank of New York Midwest Trust Company, a subsidiary of the Bank of
New York, is the trustee of the plan and, therefore, these transactions qualify
as party-in-interest transactions.
All company contributions for 2001 have been made in common stock of TDS and
USCC.
Page 9
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TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
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NOTE 7 - Sale of Subsidiary and Transfer of Participant Accounts
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Effective January 1, 2000, TDS sold the stock of a subsidiary, Aerial
Communications, Inc. to VoiceStream Wireless Corporation (VWC). Plan assets
related to the accounts of Aerial participants totaling approximately
$18,800,000 were transferred to a new plan on March 20, 2000.
During June of 2001, the plan eliminated the Aerial Communications, Inc.
investment option previously available to all other participants. All Aerial
stock held by participants had converted to VWC stock upon the sale of the TDS
subsidiary during 2000 noted above. These participants were given the option to
transfer their VWC stock funds to another fund of their choice by the end of
June, 2001. If the participant did not elect a fund for transfer, their fund
balance was transferred to the LaSalle National Pooled Income Fund.
Approximately $5,500,000 was transferred out of the VWC fund during 2001.
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NOTE 8 - Tax Status
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The plan obtained its latest determination letter on January 27, 1999, in which
the Internal Revenue Service stated that the plan, as then designed, was in
compliance with the applicable requirements of the Internal Revenue Code (IRC).
The plan has been amended since receiving the determination letter. The plan
administrator and the plan's tax counsel believe that the plan, as amended, is
designed and being operated in compliance with the applicable requirements of
the Internal Revenue Code. Therefore, they believe that the plan was qualified
and the related trust was tax-exempt at the financial statement date.
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NOTE 9 - Reconciliation of Financial Statements to Schedule H Form 5500
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A reconciliation between the financial statements and Form 5500 as of and for
the year ended December 31, 2001 is as follows:
Total net assets per Form 5500, Schedule H $ 119,256,463
Benefits payable accrued for the 5500 368,489
--------------
Net Assets Available for Benefits Per Financial Statements $ 119,624,952
==============
Increase in net assets per Form 5500, Schedule H $ 5,155,287
Benefits payable accrued for the 5500 368,489
--------------
Increase in Net Assets Available for Benefits Per
Financial Statements $ 5,523,776
==============
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NOTE 10 - Subsequent Events
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During April of 2002, the plan was amended so that the company's matching
contributions are no longer made in the form of TDS or USCC stock. Company
contributions are now allocated to an employees' account based on the employees'
elected allocation percentages.
Page 10
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SUPPLEMENTAL INFORMATION
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TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR
Plan 003
EIN 36-2669023
December 31, 2001
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(c)
Description of Investment
Including Maturity Date,
Rate of Interest,
(b) Collateral,
Identity of Issue, Borrower, Par or Maturity (d) (e)
(a) Lessor, or Similar Party Value Cost Market Value
--------------------------------------------------------------------------------
Common Stocks
* Telephone and Data Systems, Inc. 320,598 shares $ 25,342,696 $ 28,773,670
* United States Cellular Corporation 380,693 shares 20,784,461 17,226,358
Registered Investment Companies
Vanguard Institutional Index Fund 263,823 shares ** 27,675,532
Selected American Shares 153,585 shares ** 4,759,611
Turner Midcap Growth Fund 300,518 shares ** 6,584,348
Mercury Select Growth Fund 197,970 shares ** 2,031,172
Pimco Total Return Fund 529,966 shares ** 5,543,449
Putnam International Growth Fund 248,368 shares ** 4,922,648
Bank Common Trust Funds
* Bank of New York 2,176,968 shares 2,176,968 2,176,968
LaSalle National Pooled Income 17,412,241 shares ** 17,412,241
Participant Loans
Loan term 1 - 5
Loans to Participants years; Interest rates -- 2,895,621
prime + 1% ------------
$120,001,618
============
* Represents a party in interest
** Cost omitted for participant directed investments
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TELEPHONE AND DATA SYSTEMS, INC.
TAX-DEFERRED SAVINGS PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
Plan 003
EIN 36-2669023
Year ended December 31, 2001
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(c) (i)
(a) Purchase (d) (g) Net Gain
Identity of Party Involved Price Selling Price Cost or (Loss)
-----------------------------------------------------------------------------
Series of Transactions:
* Telephone Data Systems, Inc. $9,805,843 $5,901,630 $4,417,869 $1,483,761
* United States Cellular
Corporation 7,573,795 4,494,975 4,386,240 108,735
LaSalle National Pooled
Income 17,402,001 10,621,467 10,621,467 --
Vanguard Institutional Index
Fund 5,971,855 3,896,207 4,273,825 (377,618)
Loomis Sayles Bond Fund 2,594,205 6,764,980 7,473,915 (708,935)
Credit Suisse Institutional Fund
International Equity 1,119,162 5,671,138 9,215,827 (3,544,689)
Turner Midcap Growth Fund 7,225,346 4,327,859 6,238,400 (1,910,541)
* Bank of New York 39,119,845 38,638,45 38,638,455 --
Single Transactions:
Loomis Sayles Bond Fund -- 5,539,987 6,132,595 (592,608)
Pimco Total Return Fund 5,543,449 -- -- --
* Represents a party in interest
| |
SignaturesThe Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, Telephone and Data Systems, Inc., the Plan Administrator has duly caused this Annual Report on Form 11-K to be signed on its behalf by the undersigned hereunto duly authorized. |
| TELEPHONE AND DATA SYSTEMS, INC. TAX-DEFERRED SAVINGS PLAN |
| By | /s/ C. Theodore Herbert |
| C. Theodore Herbert, Vice President - Human Resources |
| Dated: June 21, 2002 |